Page 10: of Marine News Magazine (December 2012)

Spending is expected to increase signiÞ cantly starting in 2013 with spending expected to be up 30 percent to $40 billion. Overall expenditures are expected to reach a massive $167 billion between 2013 and 2016. In 2012, deepwater capital and operational expenditures are expected to surpass shallow water capital and operational expenditures for the Þ rst time. The deepwater ß oating and pipeline infrastructure being installed, coupled with the next wave of infrastructure expected to be deployed, will provide development opportunities and establish the next generation of production facilities to support the hub-and-spoke development concept. Led by the rising number of forecast world class capital projects , availability for high-end marine construction vessels is expected to tighten considerably even within the growing supply base. Over 5,000 km of pipelines are forecast through 2016, a more than 25 percent gain from the previous Þ ve years. At year-end 2011, sixty-three thousand metric tons of ß oating production system (FPS) topside orders were tabulated, marking the highest level in recent years. Moreover, spending on Spar FPS types is projected to increase four-fold to $6.4 billion over the forecast period (2012-2016) compared with the previous Þ ve years. Similarly, spending on semi-submersible platforms is forecast to grow to $3.3 billion a nearly 250 percent increase sequentially. The decommissioning sector in the region is also expected to see a major transformation. Decreased shallow-water installations coupled with high activity driven by recent major hurricanes and the governmentÕs idle iron policy are expected to lead to a larger number of abandonments and a rising trend for decommissioning opportunities. The signiÞ cant challenges in deepwater removals and abandonments (subsea wells and structures) will translate into higher value contracts than the shallow water work, lending a brighter outlook for companies involved in this market. Robust Outlook for Deepwater Development : Since 2008, the U.S. Gulf of Mexico has undergone a shift in project development mix from heavy in small, independent- -operated subsea tiebacks to one that is grounded in fewer, larger subsea tiebacks and high- -investment stand alone developments developed by international oil companies and mega- -independents. Risks to the regionsÕ future include the uncertain global macro-economic outlook and the implications of government regulations. Nevertheless, operators and contractors dedicated to the region are expected to prosper in the coming years. Those players unable to adapt to the new realities of the region are expected to struggle while those with other, global interests will continue to move out of the Gulf. Also according to Quest, the Gulf of Mexico is expected to continue to be one of the leading deepwater regions in the world for the foreseeable future and to continue to provide a safe source of domestic energy for the United States. BY THE NUMBERSQuest O shore Resources specializes in analyzing the technology trends key to the deepwater upstream oil & gas industry. www.questo shore.com; E-mail: josh.douglas@questo shore.com 10 MNDecember 2012